As product usage analytics deliver a stream of data and insights into product team dashboards, user retention metrics have become an increasingly reliable KPI to measure day-to-day user, product, and company health. While retention information has long been useful for SaaS, it is becoming increasingly important for B2B on-premise software, too.
Customer retention is vital to the growth of your business since the cost of user acquisition is much greater than maintaining and growing an existing account. Research shows that increasing retention by 5% actually increases profits anywhere from 25% to 95%, so let’s define user retention, how to measure it, and what to do to improve it.
What is User Retention?
User retention refers to the sustained use of a product, feature, or application by customers. Although it is easy to determine retention for feature usage by checking if the feature has been used at least once in a specific time frame, measuring retention for a complete app or product requires more specific guidelines. It is crucial to establish the usage criteria that will be regarded as product usage before starting to measure retention. For instance, does the mere act of opening the app or accessing the website constitute usage, or is there a higher requirement based on factors like the length of time spent or the number of key features utilized?
What is User Churn?
User churn, along with the churn rate, is a component of user retention metrics that examines the total count of users who have discontinued using a product during a designated time frame. It is crucial to define the retention period appropriately. For instance, if your app is utilized on a daily basis, a shorter time frame would be more appropriate (especially if daily retention rates are crucial). Conversely, if your app is used monthly, a longer time frame would be more suitable. It is important to grasp the context of how your mobile app or website is used and establish a relevant period for analysis to obtain more useful insights.
Discover how to manage churn in the SaaS Churn Rate Survival Guide.
How to Measure User Retention?
Once you decide on a relevant time frame, you can measure retention by taking the number of active users back at the beginning of that period and subtracting it from the number of those users who are still using your app at the end. To make the equivalent retention rate calculation, simply divide the number by the end number.
Churn Analysis Definition in Usage Intelligence
At the most basic level, churn analysis is measuring how many users leave your application in a given time frame. Usage Intelligence provides a few options that allow you to look at churned, or lost, users from a few different angles.
Churned User Profile Report in Usage Intelligence
Get insight into the product details, OS profile, and hardware specifications of users who churn away from your product so you can begin to build the profile of what typical churned users look like and start finding out the root causes.
How to Improve Product User Retention
Understanding the lifetime behavior patterns churned users had before they walked away from your product or app can help you identify variations from your more loyal customers. Analyzing overall product engagement and retention or drilling down into feature usage and user experience will give you a more specific picture of churned user interaction.
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Once you have identified the factors leading to churn, you are in a better position to take steps to improve retention. If users are churning after the first of three steps in your “getting started” onboarding wizard, it makes sense to reexamine it and identify how and why users are getting hung up on step 1. If your user flow analysis reveals patterns leading to churn, it may make sense to focus on usability and user experience efforts to improve user engagement, and therefore increase retention.
Perhaps you are seeing that key features associated with user success and value are not being discovered or have limited use. In-application messaging can improve your overall retention efforts by educating users at risk of churning on the best ways to use those features and pointing them to how-to videos and knowledge base articles.
Instead of waiting until something goes wrong and reacting through customer support, customer success aims to ensure the user is gaining value from the product or services at every step. With product usage analytics guiding the way, both Customer Success and Product teams are well-positioned to proactively improve user lifetime value and retention by focusing on these metrics and the underlying causes.
Detailed software usage reports expose key areas where you need to take action, helping you improve customer experiences to ultimately boost user retention.
Common Questions
What is user retention and why is it important?
User retention refers to the continued use of a product or feature by customers over time. It’s critical because retaining existing users is far more cost-effective than acquiring new ones. Research shows that increasing retention by just 5% can boost profits by 25% to 95%.
How is user retention different from user churn?
User churn measures the number of users who stop using a product within a specific time frame, while retention measures those who continue using it. Both metrics are closely related and help businesses understand product health and customer loyalty.
How do you measure user retention?
To calculate retention, define a relevant time frame based on product usage patterns (daily, weekly, monthly). Then, compare the number of active users at the start of the period to those still active at the end. Divide the remaining users by the initial number to get the retention rate.
What factors commonly lead to user churn?
Churn often occurs due to poor onboarding experiences, usability issues, lack of engagement with key features, or unmet expectations. Identifying these patterns through product usage analytics helps businesses take proactive steps to improve retention.
How can companies improve user retention?
Strategies include:
-Enhancing onboarding processes to reduce friction.
-Using in-app messaging to educate users about valuable features.
-Collecting and analyzing user feedback early.
-Proactively engaging through Customer Success initiatives to ensure users gain value at every stage.
